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Crude oil prices recorded their second highest settlement for the month on Thursday on rising concerns that the global oversupply is rising.

Although the weekly U.S. crude inventories declined way below what analysts were expecting, market sentiments about the still rising U.S. production have dampened the efforts of the Organization of Petroleum Exporting Countries to balance out the crude market by stabilizing oil prices.

Meanwhile, the organization has recently announced that they have reached an initial agreement to extend the OPEC oil production cut which was agreed upon last November until the end of the year.

OPEC To Extend Cuts

In a most recent report from Iran and Algeria oil ministers, a number of OPEC members and partners have initially reached a collective deal to extend the oil cut deal until the end of the year.

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Algerian Oil Minister Noureddine Boutarfa and Iran Oil Minister Jabber al-Luaibi stated that the announcement will be made this coming May 25 at the OPEC meeting in Vienna. Boutarfa also announced that Algeria along with Iraq will maintain a united stand in the proceeding cuts.

Although no more details regarding the cut extension were given, the organization is currently expected to cut around 1.2 million barrels per day from the global supply while eleven other non-OPEC members like Russia would be cutting 600,000 barrels per day. Nigeria and Libya are the two OPEC members that would be exempted from the cut while Iran would be raising their output to a specific amount.

Given the lack of information regarding the cut extension, the markets are now currently concerned to whether the organization would be able to fulfill its part of the statement while some have stated that the oil cuts might have to be extended beyond 2017 and that a longer extension would

Oil Prices

Crude oil prices have recently hit five-month lows earlier this week but later recovered on the reports from the EIA regarding a 5.2 million barrel drop that exceeded market forecasts.

As early as Wednesday, oil prices have rallied by 3% on data that the Energy Information Administration delivered a lower than expected weekly rise.

The June West Texas Intermediate crude on the New York Mercantile Exchange rallied by 1.1% or 50 cents at $47.83 per barrel which happens to be the highest close May. July Brent crude on the London’s ICE Futures exchange rallied by 1% or 55 cents to $50.77 per barrel.

June gasoline on the Nymex rallied by 1.5% to $1.562 per gallon while June heating oil  rose 1% to $1.490 per gallon while the Brent have returned back above the $50 level on doubts that the OPEC would not be able to fulfill its plan to extend the oil production cut.

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